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Wednesday night there will be a joint meeting of the Planning and Housing Commissions to discuss the future of Santa Monica’s housing policies. (Don’t ask me why there is a joint meeting. The commissions have a total of 13 members, all of whom should have thoughts about those policies. Anyway – expect heat, hope for light.)

Events are moving fast when it comes to housing policy. Decades of chickens, in the form of resistance to building needed housing in coastal California, including in Santa Monica, have come home to roost. A devastating shortage of housing has jacked up rents (meanwhile making homeowners rich) and created unprecedented levels of economically-caused homelessness. Finally the State of California and regional authorities are doing something about it.

I highly recommend reading the staff report for Wednesday night’s meeting. The report does primarily two things: (i) it reviews state and regional actions since 2017 designed to stop local governments from preventing housing from being built and to require them to plan for, allow, and facilitate more housing, and (ii) it presents data from the consultants hired by Santa Monica showing that extending affordable housing inclusion requirements mandated two years ago on development in downtown Santa Monica to the rest of the city would make housing development outside of downtown infeasible (as it has largely become in downtown).

As for the new limitations on local government’s control over land use, California has enacted various laws since 2017, described in the staff report, encouraging and expediting housing development. When it comes to dramatic change, however, nothing beats what happened November 7 at the regional level. Responding to dramatic action from the governor to require plans for more housing development, and concerted action by housing activists, our regional planning authority, the Southern California Association of Governments (SCAG), made the overdue acknowledgement that the region needs a large number of new housing units, 1.3 million, and that the majority of those units need to be built, because of existing need, near concentrations of jobs and transit along the coast.

The new SCAG housing numbers, assuming they are approved by the California Department and Housing and Community Development (HCD) and survive the inevitable litigation from coastal cities, will require drastic revision of housing policies in Santa Monica if the City is going to avoid fines and other penalties. The new requirement for Santa Monica will be a net increase of about 9,000 units over eight years. To give you an idea of how dramatic this change is, over the past 24 years, the average number of new units built in Santa Monica was 217. (For more data about housing production in Santa Monica, see this post of mine from last spring.)

Still, lest anyone panic (I’m sure people are), 1,000 units per year would be only about a 2 percent annual increase in the number housing units in Santa Monica, and 9,000 units would be a less than 20 percent increase over about a decade. But the increase is overdue; from 1980 to 2018 the total number of units in Santa Monica increased only about 14 percent (from 46,393 to 52,871). An increase to 60,000 units is nothing a city with Santa Monica’s resources can’t handle. (I won’t go into it now, because I’ve written so often about the real impacts of population growth in Santa Monica (as opposed to the mythical), but these new residents will not contribute to the traffic that results from commuters coming to Santa Monica and the Westside in the morning and leaving in the afternoon. In fact, to the extent the new residents have jobs on the Westside, they will reduce those trips.)

The rest of the staff report, including exhibits, is all about a financial analysis the City Council asked for regarding what would happen if the City extended the affordable housing requirements of the 2017 Downtown Community Plan (DCP) to the rest of the city. Why the City would consider extending the requirements is a mystery, since those DCP requirements have resulted in little housing, and virtually no affordable housing, being built downtown. (You can read more about the disaster of the DCP here.)

The reason for the analysis is, however, that there are a lot of “pseudo-housers” active in Santa Monica politics, including a large contingent in Santa Monicans for Renters Rights (SMRR). Yes, it’s ironic that an organization dedicated to the interests of apartment renters consistently supports the traditional antipathy of suburban homeowners against apartments. SMRR has always opposed the building of apartments unless they are deed-restricted affordable, which is another way of saying they don’t want apartments to be built, given that it’s difficult to find funding for subsidized, standalone affordable projects. SMRR is the best friend of apartment owners who want to increase rents when rent-controlled units are vacated, because SMRR fights the building of new units that would compete. The pseudo-housers like nothing more, however, than to enact laws that proclaim their “progressiveness” even while demonstrating their opposition to any change in the perfection they evidently find in Santa Monica. That’s why they are pushing an extension of the DCP requirements.

Genuine needs for genuine, not rhetorical, progress, however, are catching up to the pseudo-housers, not only because of high rents and homelessness, but also because of the broad recognition that to reduce carbon emissions it is going to be necessary to live more densely, closer to jobs and transit.

Regardless why the City decided to study extending the DCP requirements, I’m happy to report that the same consultants who too-optimistically found in 2017 that the DCP requirements would not impede housing development downtown have realistically determined that extending those requirements citywide would make nearly all housing development infeasible, especially when compared to the profits that can be made by commercial development. (I wrote about the financial advantages for commercial development in this post from 2017.)

Getting
back to Santa Monica’s pseudo-housers, I can predict how they will respond to
the new SCAG housing assessment of 9,000 units. About one-half of these units
should, according to SCAG, be affordable to low-income households. This is
undoubtedly correct (although I don’t believe SCAG has fully taken into account
the impact of building new housing on the preservation of affordability in old
housing). What I predict, however, is that Santa Monica’s pseudo-housers will
seize on this data point and demand that all housing development in Santa
Monica be 50 percent low-income affordable. Of course, this would kill private
investment in housing, which is what the pseudo-housers want. (To the extent
market-rate and moderate-income housing is not built, old, affordable housing
stock will continue to be cannibalized and turned into higher-priced housing, but
that has never bothered the pseudo-housers.)

So,
with all this, where should the City go with housing policy? To me, the City
should first return to prior tried-and-true policies that resulted in housing,
including affordable housing, being built in Santa Monica over the past 25
years. Then the City should also build on policies, such as the new state law
on additional dwelling units (ADUs), to encourage more housing. These policies
would include:

• In all commercial zones, give residential housing a double FAR over commercial. This advantage for residential development resulted in around 2,000 units being built in downtown Santa Monica, and the conversion of commercial zoning to residential development means less traffic. It would also solve the “site” problem, since Santa Monica has lots of underbuilt commercially-zoned land.

•
In general, increase the zoning envelope to the maximum allowed in the general
plan, but at least by one story in all multi-family and commercial zones.

•
Return to the moderate-income policy that existed under Measure R until a few
years ago, by which a developer could build a 100 percent moderate income
project without other requirements. This policy resulted in hundreds of deed-restricted
moderate-income units, many of which are now occupied by Section 8 tenants,
being built without a dime of public subsidy. A few years ago the
pseudo-housers killed this unsubsidized moderate-income development by adding a
low-income requirement.

•
For the minimum of 15 percent of total units that need to be (and should be)
low-income under Measure R, rely on and fund non-profit developers (such as
CCSM and homeless service providers like Step Up or the People Concern) and
require a small, perhaps 10 percent, inclusionary requirement on large
market-rate projects (meanwhile charging a significant in-lieu fee on smaller
market-rate projects).

•
Look into ADU zoning that would allow ADUs big enough for families to be built
in R1 zones.

In my last blog post I wrote about how affordable housing policy has interacted with the politics and economics of development in Santa Monica. In this post I’d like to look beyond that to some of the forces that shape the market for housing.

Housing attracts contradictions. Start with price. People generally complain when housing prices are too high: it’s not good when people have to spend too much of their income on decent housing (or even worse when they spend too much of their income on substandard housing).

But then bad things also happen when prices are too low. Think about the crash in housing prices in the Inland Empire — housing was suddenly much less expensive, but the rapid decline in prices caused a lot of heartache.

Affordable prices for real estate are not themselves a solution to poverty. Think generally about the most disadvantaged areas in Los Angeles County — property values are low, but because of low incomes, housing is still unaffordable to many, and many pay a lot (relatively) for poor quality housing. (Like any commodity, when it comes to housing price and value are related — think of those people paying $500 to rent a room in an illegally subdivided house.)

It costs real money to build good housing. High property values also translate into better public services — it may be an anomaly from our agrarian past, but governments rely on real property taxes. Many ordinary folks rely on the investments they make in real property.

Perhaps when we say that housing prices are too high, what we’re really saying is that incomes are too low.

Housing prices also make a joke out of the classic economics of supply and demand. You’d think that increasing the supply of housing would automatically lower prices, and certainly if there isn’t enough housing rents and prices will tend to increase. But if you believe the solution to high housing prices is simply to build more housing, I’ve got an apartment to rent you in Manhattan.

Many people want, need or like to live where many other people live, and so typically the most dense cities or the most dense neighborhoods in cities, where the number of units of housing is the greatest per acre, have, other things being equal, the highest rents and property values (at least on a per square foot basis).

That’s because these dense neighborhoods are typically convenient to “amenities” that people need or want, from jobs (most important) to shopping to entertainment. Supply is also not, as the economists say, “elastic”: there are always physical or legal restrictions on how much can be built in any given area.

I say that many people want or need to live near other people, because it’s not true for everyone. One mistake that people commonly make about housing is to generalize about housing needs and wants, usually based on their own. The housing policy of the whole country was misguided for decades, generations even, because of a generalization that all Americans wanted to live in single-family suburban houses.

The only good housing policy is a non-dogmatic housing policy. Beware anyone who says that everyone wants to live a single-family home in the suburbs or that everyone wants to live in an apartment in town.

Having said that, one always has to look at the realities of any given situation. In Santa Monica nearly 32% of all land in the city is zoned for single-family homes, but there are few empty single-family lots, and no matter what, virtually all new housing is going to be in some kind of multi-unit development.

It’s also not surprising that housing is expensive in Santa Monica. Many people want to live here, and it’s not only the beach or the weather that attracts them. Santa Monica was always a jobs center, but over the past 30 years Santa Monica added more than 9 million square feet of offices. We also built hotels and invested in our downtown, and employment increased in the hospitality industry and in retail. At the same time the enrollment at Santa Monica College increased significantly.

Little housing was built for these workers and students. Some say that our housing resources should go only to house current Santa Monica residents, but they ignore the reality that economic development in Santa Monica has contributed to a regional need for housing (and a local crisis in commuter traffic).

The demand for apartments in Santa Monica also reflects broad demographic trends affecting housing markets nationwide. The two largest generations in U.S. history, the Baby Boomers and the Millennials (roughly defined as those born between 1980 and 2000) are both increasing demand for apartments (and condos): the former because as they age they are moving out of now empty, single-family nests, and the latter because only the oldest of them have started to form families and look for nests to fill (and for cultural and economic reasons it appears that fewer of them than in prior generations want to live in the suburbs).

These demographic changes have resulted in changes to the form that households take. Some recent research indicates that over the next 20 years, 87% of growth in households will be households without children, and 53% of all growth will be single-person households. I see this in my own family — my 92-year-old father has lived alone since my mother died six years ago, and my 23-year-old son, when he starts graduate school at UCLA in the fall will be looking for his own apartment (on the other hand, he may not find one, which could mean that he’s won’t be living alone and that his parents won’t be empty-nesters).

The challenge for Santa Monica is to respond to the need to house people who work, study, and retire here, while at the same time providing housing for a full range of incomes, including housing for people who essentially have no incomes and would be homeless without assistance. As I said, it’s a challenge.